Question

Coronado Industries uses the percentage-of-receivables basis to record bad debt expense and concludes that 3% of accounts receivable will become uncollectible. Accounts receivable are $385,200 at the end of the year, and the allowance for doubtful accounts has a credit balance of $2,870.

(a)		Prepare the adjusting journal entry to record bad debt expense for the year.
(b)		If the allowance for doubtful accounts had a debit balance of $887 instead of a credit balance of $2,870, prepare the adjusting journal entry for bad debt expense.

(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.	Account Titles and Explanation	Debit	Credit
(a)	Enter an account title	Enter a debit amount	Enter a credit amount
	Enter an account title	Enter a debit amount	Enter a credit amount
(b)	Enter an account title	Enter a debit amount	Enter a credit amount
	Enter an account title	Enter a debit amount	Enter a credit amount

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Answer 1

Bad Debt Expense = (Accounts receivable ending balance x percentage estimated as uncollectible) – Existing credit balance in allowance for doubtful accounts or + existing debit balance in allowance for doubtful accounts.

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